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We can be more optimistic on stimulus relief because Democrats underperformed in places they didn’t expect: Political Strategist

Mattie Duppler, National Taxpayers Union Senior Fellow joins the Yahoo Finance Live panel to discuss the latest on the 2020 presidential election as we await final results.

Video Transcript

ZACK GUZMAN: As Akiko was mentioning there, obviously, there were some expectations out there of a potential blue wave, especially when it comes to control there in the Senate. That is not shaping up today. It raises new questions about where stimulus talks might go after we get clarity both in terms of that Senate race, the final count there in seats, but also who's going to take the presidency. So joining us now with a look at how that might shake out here is Mattie Duppler, National Taxpayers Union Senior Fellow. And Mattie, I mean, we were talking about how this race might go. Obviously, it's going to have some pretty large implications when it comes to where these negotiations go from here, but first, just want to get your take on what you're seeing play out, and how it maybe leads to protracted, not just conversation around who's actually going to win this election, but also where we go on those negotiations from here.

MATTIE DUPPLER: Well, Zack, you and I have been talking for months now, will they, won't they? Will we get a deal on coronavirus relief in the United States Congress? The election results may or may not move the needle there. We saw just a few minutes ago that Mitch McConnell had actually said something very encouraging about needing a coronavirus relief package before the end of the year. Of course, we've heard a lot of that discussion from both sides of the aisle, both Nancy Pelosi, Mitch McConnell and the Trump administration saying they want a package done, and no dice so far. Hopefully, some movement in that regard could be forthcoming.

Now, I do think that when you're looking at the results from last night, what we know, the reason to be maybe a little bit more optimistic that we'll see some movement on stimulus relief specifically is that Democrats really underperformed in places where they did not expect to be on defense. I'm talking about the House of Representatives. Looks like Nancy Pelosi is going to be controlling a Democratic majority, but one that is much smaller than what she had going into Tuesday. And then of course in the Senate too. You saw a lot of races there that were on the fence for Republicans for a little bit, but some of those seats where Democrats really felt there'd be more competitive like Maine are looking like they will break Republican. To me, that indicates that there's a lot more opportunity for Republicans to go back to the negotiating table, make some of the demands that Nancy Pelosi has really been resistant to meet them on, and hopefully get a package done, like I said, before the end of the year.

AKIKO FUJITA: What are some of those key issues that you think Republicans have a little more leverage on?

MATTIE DUPPLER: Well, for a long time, Democrats in the House have said this all comes down to state and local aid, getting that total number up higher than where Republicans were willing to come in. I've said all along that's a nonsense starting point, right? And this is the whole problem with Washington DC. We talk about spending like the numbers the big deal, when at the end of the day, it's the impact on Americans.

We need to have a public policy that is supporting the people who are suffering the most in these very uncertain times. Having aid go to state and local governments may be a part of that, but Nancy Pelosi has really been digging in her heels saying she needed to have $500 billion to begin with. No estimates including from the Federal Reserve and from state governments themselves indicate that $500 billion is anywhere near the number that they're going to need, so I do think that House Democrats, particularly if they're looking at a smaller majority next year, will be very, very encouraged to come to the table and make a deal on those numbers to get something across the line rather than trying to hold up to the end of the year some kind of relief for Americans when we know going into the winter months that we're going to need even more support for American businesses and workers that they so far haven't seen since that CARES Act passed in the spring.

ZACK GUZMAN: Yeah, and we talk about how talks had broken down back then when you're saying we were covering this, this will they, won't they, and it did drag on for a long time. But right now, they're not enjoying what they enjoyed back then, which was mostly it was just cases that we saw rising. They had the benefit of not necessarily seeing hospitalizations spiraling out of control. They didn't necessarily see deaths really spiking now. I'm curious to know how much you think that that and what we're seeing here in some parts of the country, including El Paso, Texas, shutdowns coming back, reversals of reopening the economy, how much emphasis and fire does that really add to getting something done rather quickly?

MATTIE DUPPLER: Well, frankly, Zack, some of the data that I think is most interesting and what we've seen over the past eight months is that consumer behavior started to change before there were even lockdowns put into place. So Americans were seeing the threat of coronavirus and appreciating that we didn't know what we didn't know in the spring and stopping going to restaurants, you know, pulling their kids out of school, a lot of that was happening before governments even told Americans to do that. Same thing happened in the summer. People started coming back online when it was safe from a public health perspective before they saw, you know, really meaningful change in government policy leading the way there.

Now, I think the winter is going to be maybe a little bit different, but I do think it demonstrates there's an elasticity here that American consumers have demonstrated, which is that when we recognize the threat, we're behaving in a way that's trying to accommodate that threat. But I think one of the biggest challenges going into the winter is that we've got Americans who are suffering from a lot of fatigue from some of the last several months of having to moderate their behavior in that way. So you know, the winter months were always going to be tricky from a public health perspective. Having the uncertainty of an election on top of it only makes things more complicated. I certainly think that the public health situation is going to continue to have a lot of acute pressure on Americans. But now that the election is behind us, the moderation in behavior may be something that we see happen more organically, because there isn't this political lens through which a lot of that behavior has been viewed for the last couple of weeks and months.

AKIKO FUJITA: Mattie, I want to get back to what you said earlier about this divided government, which if you look at the numbers right now, it appears that that's going to continue. And of course, I preface this by saying, we don't know who's going to take the White House, but let's say it is in fact Joe Biden. You look at the tax policy here. He campaigned on raising the corporate tax rate to 28%, sort of bringing it back to the Obama era, raising taxes on those who make more than $400,000. You've got now the Republicans who've made some inroads in Congress. I mean, how do you see that debate playing out? And ultimately, with a divided government, what's going to be done on that front?

MATTIE DUPPLER: So on tax policy, there's a couple of things that come to mind immediately to me. One, you need Congress to be involved to get tax changes done. As we've seen with the Trump administration trying to do payroll tax changes without congressional interaction, you can't do much from the executive branch on taxes alone. So you need Congress in order to make big changes. However, because of the way the Tax Cut and Jobs Act was crafted and because of budget rules here in Washington DC, there is a looming deadline for a lot of components that will hit Americans starting in 2022. Some of those tax cuts start to expire, particularly tax cuts that relate to businesses and full expensing, those are big bottom line items for small businesses. And of course, the majority of the business income in this country are those passive businesses who are using that component of the tax code to try and alleviate the tax burden on their businesses.

So the fact that you've got that deadline hanging over you may impel some kind of discussion in Congress. But as we know, Congress likes to go right up to those deadlines, and they always get another year in terms of being able to enact retroactive changes. So I do think that we could get to the end of the next presidential term, whether that's Biden or Trump, without seeing any real meaningful changes on tax policy. That corporate tax rate going back up would be extremely challenging in this environment with so much uncertainty on the public health and economic front. I don't think even Joe Biden walking into the White House next year would have the tools to make that kind of radical change right away.

ZACK GUZMAN: No, it's a very good point, and obviously something we're going to be watching here. As you said, we don't know yet who's going to be in that office, but we'll continue to track the election results as they come in. Mattie Duppler, National Taxpayers Union Senior Fellow, appreciate you coming on to chat with us.